Agriculture Committee on Feb. 26th, 2019

[The Chair, Liberal, Pat Finnigan]

Good afternoon, everyone.

I'm sorry; there were votes.

This time of year you never know. We have to go to vote when we have to and sometimes it's at the last minute.

So we'll make use of the time we have.

We have about 45 minutes. We have to do a little bit of business for the drafting instruction and the subcommittee report. We'll see how the conversation goes.

Welcome and thank you very much for being here, Dr. Leach and Mr. Metatawabin.

We'll give you seven minutes for your opening remarks and then we'll go to the questions.

Mr. Metatawabin, you may begin.

[Shannin Metatawabin, Chief Executive Officer, National Aboriginal Capital Corporations Association]

Waciye. Good afternoon. My name is Shannin Metatawabin. I'm the chief executive officer of the National Aboriginal Capital Corporations Association. I'm also a member of the Fort Albany First Nation of the Mushkegowuk Nation in James Bay. I am joined today by my board chair, Andrew Leach, who is also the board chair for the Tale’awtxw Aboriginal Capital Corporation, TACC, and a member of the St’át’imc Nation.

I would like to thank you for the invitation to speak today regarding an important study on the support for indigenous Canadians in the agriculture and agri-food industry.

Before I get into my remarks, I'd like to acknowledge we are on the unceded territory of the Algonquin people.

The National Aboriginal Capital Corporations Association, commonly known as NACCA, is a representative organization of 59 aboriginal capital corporations or aboriginal financial institutions across Canada. They provide developmental lending to hundreds of indigenous entrepreneurs of first nations, Métis and Inuit heritage.

NACCA is also a program delivery partner with Indigenous Services Canada and administers the delivery of the aboriginal business financing program on behalf of the Government of Canada.

Aboriginal financial institutions are an incredible success story. During a 30-year program partnership with the government, aboriginal financial institutions, with the help of modest federal subsidies, have provided over 45,000 loans totalling $2.5 billion to first nations, Inuit and Métis owned businesses. Of special note, they started with $240 million and recycled it 11 times.

Each year, aboriginal financial institutions provide over $100 million in loans to 500 indigenous-owned start-ups and 750 existing businesses. Aboriginal financial institutions have a current aggregate loan portfolio of $329 million.

Indigenous businesses are a key driver of employment, wealth creation and better socio-economic outcomes for indigenous people in Canada.

Aboriginal financial institutions have also been very active in the indigenous agriculture and agri-food sector. In fact, five aboriginal financial institutions were capitalized specifically to support this business sector alone.

In 2017-18, 8.9% of the businesses that received a loan from our network were in the agricultural sector. This has accounted for about $3 million in lending activity and delivers broad socio-economic results.

The committee has heard from previous witnesses about the many challenges and opportunities associated with indigenous participation in the agriculture and agri-food sector. You heard about what is perhaps the most profound challenge: food security in indigenous communities, particularly in remote communities. This is a national crisis and must be addressed.

The committee has also heard about the growing opportunities in indigenous agriculture and agri-food. Chief Byron Louis described many indigenous success stories in farming, agriculture and other sectors. The committee has also heard about many of the unique challenges facing indigenous agriculture and agri-food: Indian Act impediments, land tenure on reserve, remoteness, poor socio-economic conditions and low rates of educational achievement, among others.

Many of these challenges contribute to what I would argue is the greatest impediment to growing this sector: access to capital. Conventional lenders and investors are not willing, or are unable, to provide the capital needed to finance businesses in indigenous communities. It is our view that the success of NACCA has been predicated on the fact that we are, and we represent indigenous institutions developing solutions with and for indigenous people. Further, it is our view that Canada should continue to build on the best practices, and the institutional supports and successful partnerships that currently exist today.

With these comments in mind, we have three recommendations for your committee.

First, there should be additional public investments for aboriginal financial institutions. Since the 1990s, opportunities for indigenous businesses have changed significantly. The number of indigenous businesses is growing exponentially as a result of new opportunities, demographics and demonstrated success, yet in the last 20 years, annual federal funding has actually decreased by 58% on a dollar value and 72% by value. Notably in this context, agriculture-specific programming and supported advisory services to indigenous farmers was cut completely in 2014.

Current loan capital and program resources do not allow financial institutions to respond to the growing interest in business development, including the agricultural and agri-food sector. Some 40% of our aboriginal financial institutions are fully loaned out. They're waiting for loans to be repaid before they can issue new ones. There is insufficient capital to respond to the needs of indigenous businesses.

NACCA has submitted a business case to the Government of Canada to seek $67 million a year to support existing aboriginal economic programs, business support, which would be a new program, and our institution. The main driver of that business case would be to create a growth fund that would provide perpetual growth for the aboriginal financial institutions to access capital by raising private sector capital.

The second recommendation is that Agriculture and Agri-Food Canada should partner with NACCA. You heard from Agriculture and Agri-Food Canada officials on their efforts to engage in business communities. We can help. We propose that Agriculture and Agri-Food Canada consider partnering with NACCA to deliver its financing and business support services. NACCA is already the program delivery partner for lndigenous Services Canada. We can build on that knowledge, experience and success, and, of course, on our relationship with our own businesses and communities. By partnering, we would build on what Minister Morneau stated in his budget speech in 2017: “We know that strong partnerships between the federal government and indigenous communities are crucial for our success.”

The third recommendation is that more flexibility is needed in existing terms and conditions. The committee heard previous witnesses describe the challenges faced by indigenous businesses when applying to programs administered by Agriculture and Agri-Food Canada. This has also been the experience of many of our business clients. A program delivery partnership between Agriculture and Agri-Food Canada and NACCA would help address these impediments in program design and delivery. NACCA has a proven track record of successfully meeting the requirements and responsibilities of accountable program delivery while meeting the needs of our clients.

I would like to conclude with the following: Aboriginal financial institutions have an enviable record of success supporting indigenous businesses across Canada, including in the agriculture and agri-food sector. However, our ability to help is limited by our funding from government. We are proud of our success, but with the resources we have, we can only do so much. It will be indigenous people who will find the solutions to the challenges instead of relying on the government and corporate Canada. Healthy indigenous businesses will be able to construct container farms, install their own community freezers, and grow their own self-sufficiency and local economies. Additional funding and new partnerships with existing programs, like Agriculture and Agri-Food Canada, would result in the creation and growth of so many more businesses.

Meegwetch. Thank you.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Metatawabin.

We shall now start our round of questions.

Monsieur Berthold, you are splitting your time with Mr. Dreeshen.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Thank you very much, Mr. Chair.

I will start with a point of order. I am seeking the unanimous consent from the members of the committee to move a motion concerning a very urgent situation in Quebec. I will read it, if I may, so that committee members can know exactly what it entails:

That, pursuant to Standing Order 108(2), the committee undertake a study on the financial impacts of the summer 2018 drought for Quebec producers; that this study consist of at least two meetings; that the Minister of Agriculture and Agri-Food and his officials be invited to appear in order to explain the refusal to accept changes to the crop insurance program that would make the claims admissible for producers affected by the drought of the summer 2018 in Bas-Saint-Laurent, Chaudière-Appalaches, Gaspésie-les-Îles-de-la-Madeleine, Saguenay-Lac-Saint-Jean and Abitibi-Témiscamingue; and that representatives of the producers affected by this drought be invited to appear.

I had the opportunity to visit Bas-Saint-Laurent twice, where I talked to producers. It seems like Agriculture and Agri-Food Canada is willing to recognize that the calculation method isn't good, but only for 2019.

[The Chair, Liberal, Pat Finnigan]

Mr. Berthold, you have to have unanimous consent from committee members to debate your motion.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

I know, but I just wanted to give some context to justify the consent, Mr. Chair.

[The Chair, Liberal, Pat Finnigan]

Since the 48-hour notice period hasn't been met, the committee's consent is required to discuss the motion.

Go ahead, Mr. Drouin.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Mr. Chair, this motion falls within the committee's work; it's intended for that. I would ask Mr. Berthold to wait until the end of the meeting to move his motion. If he wants to table it in public, I have no problem with that. However, this requires consultation with committee members, and we would like to let our guests testify. We aren't necessarily against the motion that Mr. Berthold just read. I'm just asking him to be patient and wait another half an hour.

[The Chair, Liberal, Pat Finnigan]

Mr. Berthold, do you agree to wait?

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Mr. Chair, we have already had the opportunity to hear from the witnesses, since we were here when the meeting began at 11:00 a.m. No one informed the official opposition that no one from your party would be present. We had a chance to have an informal discussion with the people here. They made an excellent presentation. Out of respect for—

[The Chair, Liberal, Pat Finnigan]

So—

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Let me finish, Mr. Chair.

Out of respect for these people, their excellent testimony and their excellent comments, I will agree to discussing my motion later, if we commit to doing so in public.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Berthold.

Since we have consent, we will resume this discussion later.

You may continue, Mr. Berthold.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Thank you very much to you, Mr. Chair, and to my colleagues.

As I said, we had an excellent meeting just before. I am very pleased that this meeting is taking place as it allows your testimony to be recorded.

You have a very entrepreneurial approach to business development to enable indigenous people to prosper and grow in agriculture. What is the secret of your success? That's what impressed me about your informal testimony that we had a chance to hear just before.

[Dr. Andrew Leach, Chair, Board of Directors, National Aboriginal Capital Corporations Association]

Thank you.

I think the things that have been the key to our success have been that we are indigenous, that we interface with the indigenous entrepreneurs across the country and that we know and understand them because we come from the same community. We're not one national organization based out of Ottawa that is trying to deliver across the country. We have people who are sometimes closely related to the people they're serving and they're able to work on the front lines with them like that.

We have learned from each other across the country. This is 20 years plus in the making. A mistake that was made in B.C. was shared with a partner in Quebec and we were able to learn from each other. We've been able to develop our institutions across Canada by collaborating with each other and learning from one another.

We have developed a pretty good approach to lending and to serving indigenous entrepreneurs across Canada. I think that's probably the key to our success.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

You also had the opportunity to tell us about the extraordinary development potential that can be made available to indigenous people who want to thrive and prosper in agriculture in Canada. Can you tell us about that potential?

[Shannin Metatawabin]

We did a study with KPMG. It identified a demand in the indigenous community for $105 million to $162 million that can be used over the next five years. Based on this study, we have created the indigenous growth fund to address the needs for that capital.

We should be able to double our loan output on an annual basis. It is currently sitting at a little bit more than $100 million. We'll be able to double that.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

I will give my remaining three minutes to Mr. Dreeshen.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you very much.

I want to thank the witnesses for being here today, Mr. Chair.

One of the things that was mentioned was the growth fund and how best to capitalize on that so that you have the ability to lend it out.

What I am thinking of are different options to be able to build that. I know that a number of years ago, groups of farmers who were retired were talking about, rather than having to sell their properties and pay the capital gains and so on, just putting that money into a fund and people would be able to use it.

I see the structure of our first nations as having that potential if they decide to. Is there any way in which that type of leveraging of funds from one nation to another might have some merit?

[Dr. Andrew Leach]

I think there is the possibility for it.

The problem is that as soon as somebody gets control of a fund, they don't want to give it up and share it, even if it's not being used. That's the challenge we face.

We have a pool of money across Canada with our different AFIs, aboriginal financial institutions. Some of us have no money, but we're a booming economy and we need more. Some of us are in a not-so-busy economy and we're holding on to money. If we said to one, “Why not hand it over to one in B.C.”, they'd say, “Why would we want to do that?” It puts a challenge.

However, we've talked to each other about how we could do that. I think, delicately, we have come to a place where we could do that. We create a framework: x percentage would be held by each of the regions, but a percentage would then be held centrally by NACCA and would be able to be distributed on an as-needed basis. Based on structures like that, we've been able to create models where we can pool monies and be able to distribute them to where they are needed.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Of course, there is the value of money. If you're not using it, there are other opportunities for other groups to be able to use it.

There was a suggestion about an Agriculture and Agri-Food partnership. I wonder if you could flesh that out.

I know my time will run out very soon. If there are any other items, either things that have been spoken of informally or formally here, that you would like to present to the chair, I'm sure everyone would be interested in that.

First, please speak to that Agriculture and Agri-Food partnership.

[Dr. Andrew Leach]

The thing we've learned at our end is that we know our entrepreneurs better than you, with all due respect. We think that if you wanted to get better access to the aboriginal farmer or the agri-food players, you could do it through an organization like ours. We have boots on the ground. We have infrastructure. You'd want to partner with us rather than create some government bureaucracy to try to serve that.

That's where the partnership comes into play. We know how to service them. They have their needs and we work together to make that happen.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Leach and Mr. Dreeshen.

Mr. Longfield, you have six minutes.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you, Mr. Chair.

Thanks to both of you for being here this morning to talk about capital.

As you mentioned in your testimony, we have heard other witnesses say this is a barrier to growth. Our Minister of Indigenous Services has been working on economic development opportunities with indigenous people and the partnerships that we need to put in place for that to happen, which are being driven by indigenous communities and then supported by us, versus the other way around.

There was a report in 2017 from BDC and NACCA which stated that every dollar invested returned $3.60. How much of that was indigenous investment coming back to us, versus BDC? What was the mixture there? Was that purely if dollars are going into indigenous agriculture, indigenous businesses would return $3.60?

[Shannin Metatawabin]

That was a study we did to look at the value of what our investment is. Every dollar brings $3.60 back to the GDP. There was another study that was a little bit older and done by Industry Canada, which showed that every dollar invested in equity returned $1.40 to the treasury department. It was an actual investment. Investing in the indigenous community brings wealth back to Canada, not just to the indigenous people in growing their economies, but to Canada.